China has allowed direct trading between the renminbi and the Swiss franc, in another step to boost the global usage of its currency.
The link will start on Tuesday, Bloomberg News reported, citing a statement from the China Foreign Exchange Trade System.
It makes the franc the seventh major currency that can bypass a conversion into the US dollar and be directly exchanged for yuan, the report said.
The rate will be allowed to fluctuate a maximum 5 percent on either side of a daily fixing, according to CFETS.
“This is an important step in strengthening bilateral economic and trade connections between China and Switzerland,” the People’s Bank of China said in a statement on its website on Monday.
The link will help lower conversion costs and facilitate the use of both currencies in bilateral trade, it added.
The announcement comes as the International Monetary Fund prepares to meet this month to review its Special Drawing Rights.
The executive board of the Washington-based institution will gauge whether the renminbi has fulfilled the criterion of being “freely usable”, after rejecting its bid in 2010.
The other major currencies that can be directly converted into yuan are the US, Australian and New Zealand dollars, the British pound, the Japanese yen and the euro.
Earlier this year, the PBoC gave Switzerland a 50 billion yuan (US$7.9 billion) quota under the Renminbi Qualified Foreign Institutional Investor program, which allows yuan raised offshore to be used to buy securities in China’s domestic markets.
In 2014, the Swiss and Chinese central banks signed a three-year currency-swap agreement that can be used to borrow as much as 150 billion yuan.
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